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US comparisons

America’s working poor pose a stark warning for Northern Ireland as the economy stagnates, John O’Farrell contends. Investing in R&D can help to turn the private sector around.

Among the squillionaires laid across the pages of the Sunday Times Rich List 2011, notable new entries were Simon, Bobby and Robin Arora, whose B&M Bargains chain specialises in selling branded goods at cheap prices (their Turkish delight is delicious, by the way). They have seen a six-fold rise in their combined worth to £298 million.

Meanwhile, the equally delicious chocolatiers Thorntons are in serious trouble. Swings and roundabouts, goes the theory. Look at the state of our shopping malls, and the changes in those cathedrals for our post-boom, post- ideology, post-God age of unreason. The malls are stuffed with pound shops and supermarkets competing on cheapness rather than quality. Every little helps, and every little observation adds to one’s understanding of the bigger picture.

Last summer, I saw something which filled me with at much rage as when I first read Orwell’s description of ‘thirties poverty. It was about 11pm in an Orlando Wal-Mart, and it was packed. I had been in the same store in the morning and afternoon (not on the same day) and it was busy, but not crowded. Then it struck me that the reason why so many local moms and pops and their kids were buying their generic groceries was that very late at night was the only time they had to shop for basics.

The working poor in America are so badly paid that they have to work two jobs to pay the rent and feed their families and fuel a car. And there are tens of millions of them. No job security, no paid holidays, no access to healthcare, no chance to fund a college education for their kids, no chance of upward social mobility, no American Dream: just crappy jobs like serving tourists like me and people like themselves in Wal-Mart.

As the kids say in the back of the rented car: “Are we there yet?” No, not yet, but we are edging dangerously closer to the American nightmare. The economy of Northern Ireland has stagnated. A look at the monthly labour market report can reveal a narrative of where we are as a functional economy, that is, an economy fit for its citizens.

If we examine how sectors of the economy are performing, we find that employment in construction has declined by 13,000 since December 2007, to 33,530, that services peaked in June 2008 and have fallen by 8,000 to 576,480. Overall, private sector employment has fallen by 32,000 since its peak at March 2008, to 480,730 in March 2011. The big falls were all over the period mid-2008 to mid-2009. Since then, there has been a slowing down in the decline. The private sector recession bottomed out, but has not shown much sign of the recovery seen in other UK regions.

The public sector employed 222,940 workers in March 2011, 3,600 down from December 2009, around the time of a recruitment freeze across the sector. The decline is due largely to ‘natural wastage’, a term more suited to eugenics than to human resources. The problems lie ahead. Conservative estimates of 30,000 public sector redundancies as a result of the £4 billion cuts in the draft Budget 2011-2015 and the additional 15,000 private sector job losses through reduced public procurement will further disport the labour market.

If we look at who has become unemployed, we see that two-thirds are from occupations which require basic education and skills, and that those higher up the food chain ‘signing on’ are distinct by their rarity. Only 1.9 per cent were ‘managers’ and 2.3 per cent were ‘professionals’. Noticeably, the second largest cohort of the unemployed were ‘skilled tradespersons’ (16.6 per cent), following in the footsteps of those on ‘elementary occupations (31.6 per cent).

R&D success

Those skilled workers would have worked in manufacturing, a sector whose plight we can no longer cheer about. Despite the welcome news about increased orders and jobs in Bombardier (whose intelligent use of tax credits and EU grants for research and development show a sense of openness and innovation lacking across much of the private sector) a harrowing picture has emerged. Manufacturing jobs stand at 74 per cent of the 2001 level, a drop of 25,000. Globalisation has seen the decimation of clothing, textiles and computer and electronics jobs to Asia. Slight increases have occurred in skilled metalwork, pharmacy and repairs, but they are, in short order, threatened by the rise of India and Brazil.

A salutary tale is told in the dramatic decline in clothing on the overall structure of manufacturing jobs; from 14.6 per cent in 2001 to 3.7 per cent now. Those jobs are now in China and Vietnam. The lesson is that skills and specialisation are more necessary than ever. An educated workforce is essential, bolstered by management with the foresight and initiative to invest in research and innovation and export-led strategies.

The timidity of the private sector is not serving us well. A better example is Ulster Carpets, who saw the writing on the wall on the fashion for laminate floors and diversified into hotels and casinos and cruise ships. Most of the woven cloth stepped over by gamblers and hopefuls in Las Vegas is crafted in Portadown, because they spotted an alternative to their ‘traditional route’. They noticed a demand for luxury for tourists and they could get their huge rolls of carpet across the Atlantic six weeks faster than their Chinese competitors. And they made all the internal changes necessary in full consultation with their workplace union.

But the overall picture is sobering. Most Northern Ireland enterprises are too small to compete internationally and are, bluntly, in the wrong fields. Only 1.8 per cent of local businesses are in information and communications, a quarter of the UK average, and 6.9 per cent are in science and tech, compared with 15.4 per cent across the UK. There is too little value added and too few opportunities for bright graduates to gain experience in business before starting up their own firms. The outlets for the clever and ambitious are emigration or the public sector, but the rules of the game are changing there too. New public servants are expected to work longer for less money with little permanence. The worst aspects of the private sector are being unleashed into the public realm.

Wage gaps

The Institute for Fiscal Studies reports that last year incomes among the top 1 per cent grew at the fastest rate in a decade. According to the Sunday Times Rich List, the top 1,000 are £60.2 billion better off this year than in 2010, bringing their collective wealth close to the record pre-recession levels. A report from the High Pay Commission reveals that FTSE 100 chief executives are on average paid £4.2 million annually, or 145 times the median wage.

Meanwhile, the wages of the less blessed are being ground down. Northern Ireland private sector wages have reached a new low of 81 per cent of the UK average private sector wage. In the past year, median private sector wages increased by 0.6 per cent. What that means is that those at the top got the cream, those at the bottom got the sour milk and the ‘median’ shifted slightly. Public sector wages increased by 2 per cent. Part-time workers, on the other hand, had a 6 per cent contraction in their wages, mostly due to reduced hours.

Which brings us back to the shopping malls. In June, the Asda income tracker survey calculated that families are now £14 a week worse off than a year ago. Food prices have risen by nearly 6 per cent in the past year with meat up 5 per cent. Soft drinks are up more than 10 per cent with chocolate bars and sweets costing up to 7 per cent more.

Which is good news for BM Bargains, bad news for Thorntons and peanuts for most consumers. This is where the race to the bottom takes us. The finishing line is an exhausted queue at Wal-Mart.

John O’Farrell is communications officer with the Northern Ireland Committee of the Irish Congress of Trade Unions.